Barclays 2012 Annual Report Download - page 300

37 Pensions and post-retirement benefits continued
Critical accounting estimates and judgements
Actuarial valuation of the schemes’ obligation is dependent upon a series of assumptions, below is a summary of the main financial and
demographic assumptions adopted for UKRF.
UKRF financial assumptions
2012
% p.a.
2011
% p.a.
Discount rate 4.31 4.74
Inflation rate 2.93 3.04
Rate of increase in salaries 3.43 3.54
Rate of increase for pensions in payment 2.88 2.94
Rate of increase for pensions in deferment 2.88 2.94
Afterwork revaluation rate 3.40 3.47
Expected return on scheme assets n/a 5.00
The UKRF discount rate assumption is based on a liability-weighted rate, derived from an AA corporate bond yield curve. For 2012 the basis for
deriving the discount rate assumption was revised. From December 2012, the rate is taken as the average of a liability-weighted rate derived from
an AA corporate bond yield curve and the Towers Watson RATE link model. The impact of this change on the UKRF Defined Benefit Obligation was
a £1.1bn decrease with no impact on the current year profit. The change will affect future years’ profits and on an IAS 19 Revised basis, the change
in estimate will result in a £50m reduced charge to the income statement, compared to if the Group had continued using last year’s AA corporate
bond yield curve. It is not possible to estimate the effect on profits after 2013.
The UKRF’s post-retirement mortality assumptions are based on a best estimate assumption derived from an analysis in 2012 of Barclays own
post-retirement mortality experience, which was carried out at the time of the latest triennial funding valuation, and taking account of recent
evidence from published mortality surveys. An allowance has been made for future improvements in this observed rate of mortality based on the
CMI (2010) Core Projection model with a 1% p.a. long term trend. The table below shows how the assumed life expectancy at 60, for members
of the UKRF, has varied over the last three years:
Assumed life expectancy
2012 2011 2010
Life expectancy at 60 for current pensioners (years)
– Males 27.8 27.7 27.6
– Females 28.9 28.8 28.7
Life expectancy at 60 for future pensioners currently aged 40 (years)
– Males 29.2 29.1 29.7
– Females 30.5 30.4 30.7
Sensitivity analysis on actuarial assumptions
The following table shows a sensitivity analysis of the most material assumptions on the UKRF benefit obligation:
Change in key assumptions
Impact on UKRF benefit
obligation
(Decrease)/
Increase
%
(Decrease)/
Increase
£bn
0.5 % increase in discount rate (9.1) ( 2.2)
0.5% increase in assumed price inflation 8.4 2.0
1 year increase to life expectancy at 60 2.5 0.6
barclays.com/annualreport298 I Barclays PLC Annual Report 2012
Notes to the financial statements
For the year ended 31 December 2012 continued